Canadian Monetary Policy And Real And Nominal Exchange Rates [Revised]

This study undertakes an analysis of the relationship between Canadian monetary policy and the movements of Canada's real and nominal exchange rates with respect to the United States and, less directly, with respect to the rest of the world. It encompasses, extends and broadens a range of more narrowly-focused rigorous theoretical models that dealt with specific details relating the real exchange rate to utility functions in endowment models or relating expected changes in real exchange rates to real interest rate differentials in asset pricing models, and with specific individual sources of real exchange rate fluctuations in models with traded and non-traded goods or with productivity shocks and market frictions.